Aging Western populations set to strain public finances
Moody's warns that aging populations in Western nations will strain public finances by reducing the workforce and increasing pension and healthcare costs. The report suggests that productivity gains are necessary to mitigate the long-term economic impact.
Why it matters
Provides a macroeconomic outlook on how demographic shifts will force difficult fiscal policy decisions in developed economies.
As Western populations age, fewer workers and higher costs will strain public finances, credit rating agency Moody's has warned.
Europe is at the sharp end of the demographic shift. The European Union's population is projected to peak as soon as 2029, "after which a sustained long-term decline will begin," according to the European Commission.
The U.S. Census Bureau does not expect the American population to peak until 2080 under its main projection , or until 2043 under its low-immigration scenario. Excluding immigration impact, the population decline has already started.
But Moody's says the fiscal pressures from aging emerge long before populations actually start shrinking.
Today, G7 economies have about three working-age people for every person over 65. That ratio is expected to fall to around two by 2050, putting further pressure on growth and public finances, including healthcare systems, according to Moody's.
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